How I decide the combination of points and cash to pay for every redemption I make

If you’ve ever redeemed loyalty earnings for a flight or hotel stay, you might know there are different combinations of points and miles you can use to pay.

For flight redemptions, you'll always have to pay some additional fees and taxes. These fees can be just a few dollars on, say, a domestic American Airlines flight or they can be outrageous four-figure amounts on long-haul premium-cabin redemptions on British Airways and Virgin Atlantic.

As for hotels, you can usually redeem points for completely free stays with no out-of-pocket costs (assuming the property doesn't have resort fees or doesn't charge them on your redemptions). The hotel may allow you to mix and match by using fewer points in exchange for some cash.

Related: Spending less than $26 for the best flight of my life: My best redemption of 2019

Whether it's for a flight or hotel, if you don’t have enough points or miles for the redemption, you might be able to compensate for the shortfall with cash.

For example, British Airways allows travelers to reduce the cost of normal cash fares by paying a specified number of Avios alongside cash through their Avios Part Payment option.

With so many different payment combinations to choose from, how do you make sure you get the best value from your points and miles?

Here’s my simple strategy.

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Calculating the value

First, you need to know what your points and miles are worth.

To find out, you can use our monthly valuations chart. Or, for airlines, you can sometimes use a simple value of 1 or 2 cents per point or mile. Hotel points aren’t as easy to standardize, though. For example, Hilton Honors points aren’t worth much while World of Hyatt points are incredibly valuable.

Second, it’s time to do some math.

For simplicity's sake, let’s say I use a value of 1.5 cents apiece for British Airways Avios. When I book a flight, I’m presented with the following options for an economy flight from John F. Kennedy International Airport (JFK) to Heathrow Airport (LHR).

Either in my head or with a calculator, I multiply each Avios amount by 1.5 cents. This would mean:

• 13,000 Avios would become $195.
• 10,400 Avios would become $156.
• 8,450 Avios would become $126.75.
• 6,500 Avios would become $97.50.
• 5,200 Avios would become $78.
• 4,550 Avios would become $68.25.

Adding the fees and taxes option to each conversion above:

• The 13,000 amount becomes $394.80 total ($195 plus $199.80).
• The 10,400 amount becomes $390.80 total ($156 plus $234.80).
• The 8,450 amount becomes $386.55 total ($126.75 plus $259.80).
• The 6,500 amount becomes $377.30 total ($97.50 plus $279.80).
• The 5,200 amount becomes $372.8 total ($78 plus $294.80).
• The 4,550 amount becomes $368.05 total ($68.25 plus $299.80).

As you can see, when you convert your Avios to cash, the difference in the cost of the various payment options is substantial. The "most points, least cash" option is the most expensive, while the "least points, most cash" option is the cheapest.

In this case, I would look to pay fewer Avios and more cash. If I'm Avios rich and cash poor, I probably wouldn’t go for the most extreme "least points" option; while I do want to redeem all my Avios at some stage, it’s nice to spread them out. Instead, I would probably choose the option with 8,450 Avios, so I could clear some of my Avios balance and still get a good deal.

Although paying real money out of pocket for your flight redemption might make it seem like you're not getting a good deal, if cash fares are more than $155 on these dates, you're still saving a huge chunk of cash.

Let’s look at a hotel example. Here is a redemption option for the new Dubai Edition, which can be booked with Marriott Bonvoy points.

I could either pay $955.97 in cash for a two-night stay, redeem 167,000 points or split it by paying one night with cash and the other with Bonvoy points.

TPG currently values Bonvoy points at 0.84 cents each, so 167,000 points would be worth $1,402.80. I can immediately see that paying all points and no cash won't be an optimal redemption compared to the $955.97 cash rate.

As I look to mix and match, say I was considering paying the first night with cash and the second night with points. I see that this would cost 1,626 United Arab Emirates dirhams ($442.69) plus 85,000 Bonvoy points (worth $714 by our valuation), giving me a total of $1,156.69. This amount is higher than the cash-only price of $955.97, but lower than the points-only price of $1,402.80.

I would probably choose this mix-and-match option as it’s a comfortable middle ground — I’m redeeming plenty of Bonvoy points but I’m still happy that I’d be getting a decent deal.

Bottom line

Mixing points and miles with cash payments can be confusing.

Once you have a simple valuation of the points and miles you want to redeem, you should find it easier to quickly calculate the different payment options. There’s rarely a single perfect choice. If you have a big mileage balance, you might be happy to obtain slightly less value by choosing less cash. If you are saving your points for a big aspirational redemption, the other end of the scale could be the better option — forgoing some cash in order to only make a tiny dent in your mileage balance.

You will generally get the best value somewhere in the middle of a sliding scale of combinations. As someone who earns and redeems many points and miles each year, this is the road I usually take.